Introduction
Globalization has transformed the world economy.
Studies have concluded that a combination of
elimination of trade barriers and liberalization
has caused unprecedented global growth within the last
decade. A lot remains to be achieved, as the progress of
the Doha Round demonstrates, but the results so far are
encouraging.
The Kenyan industry has risen to the challenges and
opportunities in globalization in recent years. The
economic base registered growth as has its foreign trade.
However, this expansion in trade has not been without
challenges. Many of these challenges relate to domestic
obstacles and inefficiencies in the supply chain, which
has retarded the growth that could have otherwise been
expected.
Dilapidated infrastructure, insecurity, bureaucracy and
inefficient service providers have contributed individually
or collectively towards inhibiting the benefits of this
expansion in trade, and are responsible for many of the
additional costs suffered by the shippers. Unless these
impediments to trade are removed, the efforts by the
Kenyan industry to expand, and the attractiveness of the
country to foreign direct investment will suffer.
The cost of transport is an important component of the
cost of doing business in Kenya and a key contributor
to the competitiveness of Kenyan firms and especially
those that export to the external markets. A variety of
factors add to the cost of transport incurred by Kenyan
firms:
• The slow documentation procedures at the Kenya
Revenue Authority both at the port and border stations
• Cargo handling equipment and holding capacity at
the port,
• Railway capacity and the condition of the roads.
• slow cargo clearance
• Frequent delays by customs procedures
• Payment for expenses beyond the control of shippers
• The frequent loses, breakages and damages
Studies have shown that 20 – 30% of the total production
costs are represented by supply chain costs. Transport and
logistics are estimated to represent about 30% of the total
supply chain costs.
Kenyan shippers are faced with a myriad of problems
confronting this. They have poor bargaining power as they are
many and not as well organized as the suppliers of transport
services, who are organized in a manner that tends towards
cartels as is exemplified by shipping lines and the road
Hauliers. The Kenyan ports and railways set rates for their
services with little consultation with the shippers. Transport
service providers recoup their losses through surcharges to
the shippers.